Dollar Fluctuates as Investors Await Fed Interest-Rate Decision

  • Euro little changed as Draghi says would intensify stimulus
  • South Africa rand rebounds after Zuma U-turn on minister

Investors Await the Fed...

The dollar fluctuated as investors prepared for the Federal Reserve’s decision on whether to raise interest rates for the first time since 2006 in a step that will further enhance the yield advantage of assets denominated in the U.S. currency.

The Bloomberg Dollar Spot Index was little changed with futures signaling that traders see a 78 percent probability the Fed will increase its benchmark from near zero at its meeting on Dec. 15-16. The greenback climbed against some currencies of commodity-exporting nations in the past week as oil slid below $40 a barrel and signs of a further slowdown in China’s economy boosted the dollar’s appeal as a haven.

South Africa’s rand jumped as South African President Jacob Zuma backtracked on his shock decision to appoint a relative unknown as finance minister and returned Pravin Gordhan to the post after market turmoil sent the currency to record-low levels.

‘Steady Stream’

“The dollar-strong trade is still very much on” even if the Fed’s rate decision is “pretty much all in the market” with regard to its level versus the euro, said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland. “While we are not going to see euro-dollar at parity, there’s still going to be a steady stream of demand for the dollar.”

The dollar was little changed versus the euro as European Central Bank President Mario Draghi reiterated that the institution would intensify stimulus if needed, which would would entrench the policy divergence with the Fed.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 counterparts, was little changed as of 8:52 a.m. New York time, after last week’s gain of 0.2 percent. The U.S. currency was little changed at $1.0982 per euro, after dropping 1 percent last week.

Economists predict a report on Tuesday will show the U.S. annual-inflation rate rose last month from October, according to a Bloomberg survey. That would further reinforce that the economic recovery is translating to consumer-price growth.

South Africa’s rand surged 4 percent to 15.2640 to the dollar, after sliding to a record 16.0543 on Dec. 11.

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